Foundations & Frontiers

The Untapped Potential of Geothermal Energy

A deep dive into why geothermal may be the key to energy abundance.

Anna-Sofia Lesiv

June 20, 2024

Geothermal energy is effectively inexhaustible. Just beneath our feet is an inferno that has been burning since the very creation of the planet, when the gravitational accretion of dust and debris molded the Earth 4.6 billion years ago. The lasting heat from that process alongside the vast quantities of radioactive isotopes that spontaneously decay and release energy are responsible for the Earth’s super-hot inner core, which at its center reaches nearly 6000 °C.

Estimates suggest that the amount of time it will take for this subterranean heat to run out could be something like 17 billion years. That’s more than three times the expected lifespan of the Sun. Other estimates suggest that harnessing just 0.1% of the Earth’s heat could supply the world’s total energy needs for two million years.

Better yet, geothermal power production involves no fuel and no emissions. It’s also very conveniently located beneath our feet at all times. If we can manage to tap this resource effectively, it could usher in an era of lasting global energy abundance. This is the promise of geothermal energy.

Early Geothermal

Nearly all power plants work the same way. There is some prime source of energy, whether that is the nuclear radiation of uranium or the combustion of fuel like natural gas or coal. That energy is typically used to heat water, which generates steam and spins a turbine to generate electricity. 

The beauty of geothermal energy is that we don’t need to look for external fuels to power this process. There is enough energy below our feet to spin all the turbines in the world for millions of years.

The first to realize that geothermal power could power electricity generation was Prince Piero Ginori Conti, who in 1904 used the natural dry steam fields in his native Larderello to power a small turbine that lit four light bulbs. Seven years later, the world’s first geothermal power plant was built in the city, benefiting from the natural steam that erupts out of the earth. Remarkably, the plant is still active today and is actually the second-largest geothermal plant in the world.

Source: Musei Val Di Cecina

Though the Larderello plant was actually the only geothermal plant in the world for forty-seven years, until New Zealand built its own in 1958, it is now accompanied by a number of other facilities worldwide. Iceland, known for its volcanoes, geysers, and hot springs, has been powering over 70% of the country’s total energy needs through geothermal for decades. Kenya, home to numerous volcanoes and regions of geothermal activity with geysers that reach temperatures of 96 degrees Celsius and subterranean reservoirs where temperatures reach 340 degrees Celsius, has been building geothermal plants since the 1980s. Indonesia, the Philippines, New Zealand, and Turkey, in turn, are some of the largest producers of geothermal power. 

However, as of 2022, the greatest producer of geothermal energy in the world is the United States. It’s also home to the largest geothermal complex, some 70 miles north of San Francisco, called The Geysers. This is actually a misnomer because there aren’t any geysers in that area. Instead, the complex draws from, vents in the surface of the Earth from which hot volcanic vapors escape called fumaroles. There are 18 different power plants sprinkled across nearly 30,000 acres which convert these hot, natural steams directly into electricity, collectively supplying 20% of California’s renewable energy. 

Source: USGS

There are over ninety-three power plants scattered around the United States, with most concentrated in California and Nevada. But even so, these plants contribute less than half of one percent of America’s annual electricity consumption. And globally, that figure is even smaller: geothermal produces only 0.34 percent of global electricity production, as of 2021.

Until now, geothermal energy has been harnessed in locations where doing so is easy. Places where either hot water reservoirs are found only a few meters below the surface, or where hot vapor is actively seeping out of the Earth. The issue is that such geological conditions are rare and tend to concentrate along the meeting points of tectonic plates. Otherwise, if the Earth isn’t visibly steaming, it can be difficult to know where subterranean geothermal resources are located.

Even outside of the presence of particular geothermal reservoirs, where hot subterranean water exists close to the surface, temperatures get hotter the further down you dig no matter where you are. The geothermal gradient of the Earth, or the rate at which temperature changes the deeper you go, averages around 25°C for every kilometer of depth. This means that nearly anywhere on Earth could be a great candidate for geothermal power if only you could dig deep enough, and for decades this has been the greatest barrier to developing the untapped opportunities concealed underground.

Digging deep is hard. The deepest hole ever dug was the Kola Superdeep Borehole in Siberia. Exploratory drilling started in 1970, and after about twenty years the Soviets managed to bore a hole 12 kilometers deep –nearly one-third of the way through the Earth’s crust. A natural stopping point came when temperatures at the bottom of the borehole reached 180 degrees Celsius. At such temperatures, drill bits became ineffective at cutting through deep granite. The tailings became increasingly difficult to remove while the structural integrity of the borehole itself became compromised amid the mounting pressure of the walls.

To this day, we still haven’t developed the tools that will allow us to reliably drill through rock at such depths and access the wealth of energy that lies beneath. However, learning to drill more effectively at greater depths will be an important component in unlocking the true potential of geothermal power worldwide.

The Promise of Enhanced Geothermal Systems

Luckily, the United States owes much of its economic prominence to its pioneering ability to dig and drill, the twin techniques that catalyzed the birth and explosion of the global oil industry.

The problem of tapping hard-to-access geothermal resources today rhymes with the North American oil industry’s challenges in the 1990s. At that time, most easily accessible oil reserves in the US were depleted. American companies began to look for new ways of extracting oil and natural gas as a result. 

The invention of hydraulic fracturing, which we covered in a previous essay on fossil fuels, allowed engineers to inject pressurized fluids to crack porous rock that harbored pockets of natural gas, letting it flow freely from below ground. Hydraulic fracturing, combined with the ability to drill horizontally, meant natural gas could be harnessed from previously unattainable reserves. As Construction Physics author, Brian Potter writes, “Thanks to fracking, shale gas went from 2% of US natural gas production in 1998 to nearly 80% of American natural gas production by 2022.”

It turns out that essentially the same techniques can be applied to unlock previously inaccessible geothermal reserves too. Enhanced geothermal systems, as they are called, aim to use fracking techniques to create cracks underground where water can be injected, heated, and then recovered at the surface and used to generate electricity. This is done through the production of two underground wells. One well injects fluids deep into areas with geothermal potential, cracking the surrounding rock. The second production well allows the heated fluid to return upwards to power a turbine. 

Source: ResearchGate

One of the most prominent companies pursuing this technique in the United States is Fervo. It’s using horizontal drilling technology to produce long, horizontal pathways through rock, potentially thousands of feet across, for both the injection and recovery wells. Drilling horizontally allows Fervo to capture far more of the subterranean heat as it can extend along the length of the hot geothermal rock.

Source: KUER, Utah FORGE

Fervo’s first commercial pilot in Nevada, called Project Red, became the most productive enhanced geothermal project in history in July 2023, when it demonstrated that its horizontal wells, which measured over 3,000 feet in length and reached temperatures of around 190 degrees Celsius, could circulate 60 liters of water per second. At peak, the project could produce up to 3.5 MW of power. The pilot proved definitively that fracking technologies, developed in the oil and gas sector, could be directly transferred to geothermal applications. 

Now, Fervo is working on scaling its ambitions by developing a 400 MW plant near Milford, Utah. This plant is set to start delivering around-the-clock power by 2026. Milford already has a geothermal plant that has been generating 34 MW since 1984, but Fervo aims to show that it can tap deeper geothermal rock using enhanced geothermal techniques to produce more steam and ten times more power. 

There’s just one last thing Fervo will need to prove out in the years to come: that it can bring costs down. Traditional geothermal plants can produce power at a cost of $450 per megawatt-hour, which is far higher than the cost of energy produced via wind or solar, between $30-50 per megawatt-hour. Even Fervo admitted its own costs were “much higher” than that as of August 2023.

However, as the scale of drilling grows and the technology matures, many are anticipating costs will fall accordingly. To support this objective,  the Department of Energy launched the Enhanced Geothermal Shot initiative in 2022: a department-wide effort to lower the cost of geothermal by 90% to $45 per megawatt-hour by 2035. 

Enthusiasm for geothermal pervades the Department of Energy. For example, Jigar Shah, the head of the Department of Energy’s Loan Programs Office, is quite the champion of geothermal. He hopes that by 2050, geothermal can supply between 90 to 300 gigawatts of power to the US, enough to power between 80 and 260 million homes.

This excitement is further underscored by the fact that the US, as it turns out, is covered in great candidate locations for enhanced geothermal. In its GeoVision report on geothermal, the Department of Energy wrote in 2019 that “based on an assumed depth cut-off of 7 km and minimum temperature of 150°C,” there are enough geothermal resources in the United States for enhanced geothermal to power the country five times over.

Source: NREL

Interestingly, a new mapping of global geothermal resources shows that virtually every military base in the Western US, along with most of the bases in Texas, sit atop geothermal rocks suitable for generating electricity. It’s no wonder that the Department of Defense, in turn, is funding its own geothermal pilot projects at six military bases.

A New Kind of Power Play

It’s not just the government that’s actively involved in developing America’s geothermal capacity.  

Google, in particular, has been actively supporting geothermal power production, primarily through its support for Fervo. It partnered with the startup to help it develop its first commercial pilot, Project Red. Then, on June 11, 2024, it announced its participation in a new agreement with Fervo and NV Energy, a subsidiary of Berkshire Hathaway Energy. Fervo is set to develop yet another geothermal power plant in Nevada, which will supply 115 megawatts of power to Google through NV Energy. The arrangement required the creation of a new kind of procurement structure, called a Clean Transition Tariff. 

On its own, enhanced geothermal produces energy at costs too high for a traditional utility to agree to. However, the idea behind the Clean Transition Tariff envisions that by guaranteeing a buyer willing to pay higher costs for the power up-front, Google can, on the one hand, kickstart demand and revenue for geothermal power production, while also securing an entirely new source of power, specifically for its needs.

There may likely be more where this is coming from. Data center owners like Amazon, Microsoft, and Google have committed to ambitious climate goals while the latter has even committed to running on entirely carbon-free energy by 2030. Conveniently, areas with growing data center demand across San Francisco, Los Angeles, Reno, Albuquerque, and others happen to sit atop regions with plentiful geothermal resources. 

While traditional utilities and grids struggle to incorporate new sources of energy generation into their mix, these types of agreements are finding clever workarounds. Google pioneered the power purchase agreement (PPA) model in 2008, which allowed corporate entities to enter into long-term contracts with developers producing power on the same grids as their data centers. Since then, PPAs have contributed to 200GW of net new solar and wind capacity around the world. 

Future Geothermal Technologies

While enhanced geothermal systems seem likely to have a bright future in the United States, they do come with a few drawbacks. Notably, traditional and enhanced geothermal systems are “open loop,” meaning that net new water needs to constantly be added to the system as water naturally dissipates into the earth over time. One alternative is to develop a “closed loop” system, which circulates and heats fluid through sealed pipes. 

This would require more involved and complex engineering to accomplish, but, just as with enhanced geothermal, the technology for doing this has already been developed and proven out in the oil industry. A Calgary-based startup called Eavor developed just such a closed-loop system in the Alberta tar sands and is now taking the technology abroad to build the first 65 MW power plant of its kind in Germany.

Source: Eavor

The project broke ground in July 2023 and has plans to run two drill rigs in parallel, which will access geothermal heat 4.5 kilometers below ground. The project also announced in March 2024 that it has already drilled down to a depth of 7 kilometers at the site.

Sage Geosystems, another startup in the geothermal space, is developing yet another means of leveraging underground geothermal — energy storage. Using surplus energy from the grid, a Sage plant can force water underground for storage, and recover it to generate electricity in times of shortage. Its first plant, EarthStore, will be a 3MW system in Texas. 

One of the most technically exciting developments in geothermal, however, is the pursuit of wholly new drilling techniques to drill deeper than we ever have before. Drill bits fail at extreme temperatures and need to be replaced — a process that can take hours. By some estimates, only one-eighth of the time on a drill rig is time that the bit is actually grinding up earth. The other seven-eighths of the time is spent on extracting and replacing the drill. The deeper you go, the longer replacements take and the more expensive, and unproductive, drilling becomes. 

Instead of using mechanical tools to grind away at rock, a more cost-effective way to drill might be to use directed beams of energy to melt it. This technology is at the heart of a new startup called Quaise, which spun out of MIT’s Plasma Science and Fusion Center in 2018

Working on building fusion reactors in 2008, research engineer Paul Woskov realized that the devices he had been building to heat hydrogen into a state of plasma for fusion might find some other applications too. He conducted experiments, pointing gyrotrons, which directed microwaves into powerful beams, at rocks and found that he could melt basketball-sized holes through them. 

Source: MIT

Quaise, which has raised $95 million to date, on the back of Woskov’s discovery, believes it can use gyrotrons to bore holes up to 20 km in depth for a fraction of the cost of traditional drilling. Furthermore, the company believes it can drill to such a depth in only 100 days since no drill bits or tailings need to be removed from the borehole. The millimeter-microwave beam can work 24/7, vaporizing rock at a rate of 5 meters per hour. Once vaporized, the rock turns to ash and is channeled up to the surface as a gas.

Source: Geoengineering Global

The benefit of drilling this deep is that it allows projects to access or produce supercritical water — a state where water remains liquid far beyond its boiling point at atmospheric pressure because the pressure 20 kilometers below ground is so high. When supercritical water is recovered at the surface, it turns back into a gas and expands 1600 times. It’s such a powerful state transition that Quaise believes tapping such a resource, from anywhere on Earth, could enable geothermal plants to deliver massive amounts of energy –enough to power any industrial activity.

For the next few years, Quaise will be focused on building field-deployable gyrotron rigs. It’s not a technology that will be ready in the next handful of years, like enhanced geothermal, but it’s one that has the potential to completely reshape the energy landscape in over a decade, if successful.

In particular, as the United States and other nations around the world shutter aging coal plants, Quaise envisions it can step in to make use of the generating equipment they’ll be leaving behind. If Quaise can dig a 20 km hole anywhere on Earth to access geothermal power, any coal plant can be quickly retrofitted into becoming a geothermal plant, without having to build an entirely new complex from scratch. 

Geothermal power, capable of delivering clean, inexhaustible power will simply be a global game-changer when fully unlocked. The perfect source of base load power to complement solar and wind resources, which are growing in number, but suffer from intermittency.

Meanwhile, the geothermal industry is increasingly becoming a melting pot for energy engineers of all stripes, incorporating technologies from both oil and gas and fusion research. This incredibly auspicious, and unlikely, mix of disciplines is coming together to develop what may become the Earth’s most important source of power.

Disclosure: Nothing presented within this article is intended to constitute legal, business, investment or tax advice, and under no circumstances should any information provided herein be used or considered as an offer to sell or a solicitation of an offer to buy an interest in any investment fund managed by Contrary LLC (“Contrary”) nor does such information constitute an offer to provide investment advisory services. Information provided reflects Contrary’s views as of a time, whereby such views are subject to change at any point and Contrary shall not be obligated to provide notice of any change. Companies mentioned in this article may be a representative sample of portfolio companies in which Contrary has invested in which the author believes such companies fit the objective criteria stated in commentary, which do not reflect all investments made by Contrary. No assumptions should be made that investments listed above were or will be profitable. Due to various risks and uncertainties, actual events, results or the actual experience may differ materially from those reflected or contemplated in these statements. Nothing contained in this article may be relied upon as a guarantee or assurance as to the future success of any particular company. Past performance is not indicative of future results. A list of investments made by Contrary (excluding investments for which the issuer has not provided permission for Contrary to disclose publicly, Fund of Fund investments and investments in which total invested capital is no more than $50,000) is available at

Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Contrary. While taken from sources believed to be reliable, Contrary has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Please see for additional important information.